Experts on why Apple's reluctance to make iPhones in India is a good thing

The case for making iPhones is not as strong as it appears. India doesn't have the hard technological infrastructure required for manufacturing.Gulveen Aulakh&Surabhi Agarwal | ET Bureau | May 21, 2016, 08:46 IST

Apple, famous and infamous for the margins it demands on its products, will require factories operating on the thinnest of margins, and the work will be just phone assembly in the near term.NEW DELHI: Apple's reluctance to manufacture iPhones in India is a good thing ­ provided the world's most valuable company and one of the world's largest supplier of software talent can work out a different arrangement. Making India a design and R&D hub for Apple.

And Apple's Bengaluru-based accelerator facility can become the first baby step in this business relationship, which will be a big upgrade from `Make iPhones in India'. The case for making iPhones is not as strong as it appears. India doesn't have the hard technological infrastructure required for manufacturing.

And Apple, famous and infamous for the margins it demands on its products, will require factories operating on the thinnest of margins, and the work will be just phone assembly in the near term. Plus, Indian consumers won't even have that much of a price advantage for iPhones made in India ­ around ` . 60,000 phone.

. 5,000 on a ` Therefore, making India a global hub for Apple's brain work is an idea worth serious consideration, say tech experts, because apart from software talent, such an idea will also serve the Indian market better. Apple reckons India is the next big market. But for India to take really to Apple products, iOS, the operating system, needs to be creatively indigenised, experts say .And that's best done out of India.

“India will have 75% of all new smartphones in the world, the product creation or the brain part is also equally important for Apple in this market,“ said Naveen Tewari, CEO of inMobi.

Tewari pointed out that Apple should work towards strengthening the ecosystem for iOS, which has fewer users in India than locally-made operating systems. For example, Indus OS has a 5.6% market share in the country, higher than iOS' 2.5%. “The reason Apple's ecosystem is so powerful in the West is because applications are really suited to the western world.To recreate that effect in India, the product ecosystem in India has to evolve through partnering indigenous app development. This will help Apple in increasing its low market share,“ Tewari added. Apple's market share in India is only 2% by volume in the overall smartphone market, and in the premium segment ­ ` . 30,000-plus ­ iPhone has a 37% share. But this segment makes up only around 4-5% of the total smartphone market. India's contribution to Apple's global iPhone sales by volume and revenue is at a mere 1%, as per Counterpoint Research.

All this can change quickly if Apple creates local design and research hubs for what can be its best market in the near future. The accelerator will create an ecosystem fertile to the idea of an Apple design centre in India, as will Apple's research centre in Hyderabad on its map products. Apple's plans for the accelerator are to work closely with dozens of Indian startups, including some prominent ones like Zomato, Paytm and Snapdeal. The aim is to “evangelise a more detailed experience for Apple products“, one entrepreneur said.

CEO Tim Cook, touring India at the moment, said that the new accelerator facility would help iOS developers create innovative apps for the company's customers globally and that the new facility would provide resources to support entrepreneurs.

“With the opening of this new fa cility in Bengaluru, we're giving developers access to tools which will help them create innovative apps for customers around the world,“ he said.

Sharad Sharma, co-founder of iSPRT, welcomed Apple's decision to open an accerelator in Bengaluru and maps centre in Hyderabad but said more can be done. He said Apple needed to be more deeply entrenched in the Indian ecosystem. “For instance, their phones with fingerprinting are still not Aadhaar complaint, so their commitment needs to increase substantially,“ he pointed out.

Tech experts say Apple should look at its counterparts Google and Microsoft for the benefits of India experience, Microsoft set up a India Development Center in Hyderabad in almost two decades ago in 1998, and Google inaugurated their centres in Bengaluru and Hyderabad in October 2004. Pramod Bhasin, one of pioneers of the Indian BPO industry , said: “India's biggest advantage is its resources. Apple is anyway not known for its manufacturing since that job is outsourced.But it is known for its design and research, where I think India can participate to a large extent."